Lululemon shares rise as sales beat estimates

Dive Brief:

Yoga wear retailer and athleisure innovator Lululemon Athletica Wednesday reported first quarter sales that beat expectations, rising 17% to $495.5 million in the quarter, past analysts' expectations of $487.6 million.
Profit fell 5% to $45.3 million in the quarter on higher costs, beating the $42.7 million expected by analysts polled at S&P Global Market Intelligence.
Lululemon also said it has pared down its problematic level of inventories, which were higher by 21% from a year before to $286 million, but lower than the 56% rise marked in Q3.

Dive Insight:

Lululemon continues to see the benefits of cost-cutting and supply chain improvements as it did in its last couple of quarters, and it seems to be recovering steadily from the hit it took after quality issues were raised by customers in 2013. That was made worse by comments from founder Chip Wilson, who said then that only women too big to wear his pants would have problems with them.

Last week, Wilson in his annual letter to shareholders called for dramatic changes at the yoga wear retailer’s board, writing, "management competence is uninspiring at best. I am not convinced we have the right leadership in place to catalyze the change necessary to win in the current global, multi-channel and dynamic environment.”

Wilson resigned from his Lululemon board post last year but retains a 14.2% stake in the company. He characterized the company’s financial performance as “dismal” and noted that Nike and Under Armour are taking market share from the athleisure innovator.

Lululemon’s shares have fallen about 6% since since Laurent Potdevin arrived as CEO in 2014, while shares of Nike and Under Armour have risen 39% and 76% during that time, the Wall Street Journal noted last week. In addition to those two big players, others—including the likes of Target, Gap’s Athleta and Amazon—have also encroached into the athleisure space.

Investors don’t appear to see things that way, however. Shares rose 4% Wednesday afternoon, adding to its 27% rise so far this year.